Comprehensive And Progressive Trans Pacific Partnership CPTPP Enters Into Force

The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), a free trade agreement, has recently come into effect for the initial six countries that ratified the deal. This agreement involves Canada and ten other nations in the Asia-Pacific region: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. It's also known informally as TPP-11.

The CPTPP encompasses a wide array of sectors, including agriculture, seafood, forest products, and industrial goods. Upon the agreement's implementation in each CPTPP country, most tariff lines will become duty-free. Tariffs on remaining goods will be gradually eliminated over specified phase-out periods, lasting up to 20 years, with variations depending on the country.

The Dawn of CPTPP: A New Era in Asia-Pacific Trade

The Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) has officially entered into force for the first six nations to ratify the agreement, marking a pivotal moment in the landscape of international trade, particularly within the Asia-Pacific region. This trade bloc, often referred to as TPP-11, comprises eleven nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The CPTPP represents a significant commitment to free trade, aiming to reduce and eventually eliminate tariffs and other trade barriers among its member states, fostering deeper economic integration and potentially reshaping global trade dynamics. The agreement's implementation signifies more than just a reduction in tariffs; it embodies a strategic realignment in the face of evolving global trade policies and the shifting balance of economic power.

Genesis of the CPTPP: From TPP to TPP-11

The story of the CPTPP is inextricably linked to its predecessor, the Trans-Pacific Partnership (TPP). The TPP was initially conceived as a comprehensive trade agreement involving twelve countries, including the United States, under the Obama administration. It was envisioned as a cornerstone of the United States' strategic pivot to Asia, designed to promote economic growth, establish high standards for trade, and counter China's growing influence in the region. The TPP aimed to create a free trade zone encompassing approximately 40% of the global economy, setting new benchmarks for various aspects of trade, including intellectual property rights, labor standards, and environmental protection.

However, the TPP faced significant political opposition within the United States, particularly during the 2016 presidential election. Donald Trump, then a presidential candidate, vehemently criticized the TPP, arguing that it would harm American workers and industries. Upon assuming office in 2017, President Trump formally withdrew the United States from the TPP, effectively dismantling the original agreement. This decision sent shockwaves throughout the Asia-Pacific region and cast doubt on the future of multilateral trade agreements.

Despite the US withdrawal, the remaining eleven TPP members recognized the potential benefits of a comprehensive trade agreement and sought to salvage the initiative. Led by Japan and Australia, these countries embarked on a series of negotiations to revise the TPP and create a new agreement that would be acceptable to all parties. These negotiations resulted in the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which retained most of the original TPP's provisions but suspended or modified certain clauses to address concerns raised by member states.

The CPTPP was signed in March 2018 in Santiago, Chile, and entered into force on December 30, 2018, for the first six countries to ratify the agreement: Canada, Australia, Japan, Mexico, New Zealand, and Singapore. Vietnam followed shortly thereafter, and other member states are expected to ratify the agreement in due course. The CPTPP represents a remarkable achievement in international cooperation, demonstrating the commitment of the remaining TPP members to free trade and economic integration despite the absence of the United States.

Key Provisions and Objectives of the CPTPP

The CPTPP is a comprehensive trade agreement that covers a wide range of sectors and issues, including:

• Tariff Reduction and Elimination: One of the primary objectives of the CPTPP is to reduce and eventually eliminate tariffs on goods traded among member countries. The agreement establishes a schedule for tariff reductions, with most tariffs being eliminated immediately upon entry into force and the remaining tariffs being phased out over a specified period, typically up to 20 years. This will significantly lower the cost of goods traded among CPTPP members, boosting trade and economic growth.

• Rules of Origin: The CPTPP establishes rules of origin to determine which goods qualify for preferential tariff treatment under the agreement. These rules are designed to prevent countries outside the CPTPP from taking advantage of the agreement by simply transshipping goods through a CPTPP member country.

• Customs Procedures: The CPTPP aims to streamline customs procedures to facilitate trade among member countries. This includes simplifying documentation requirements, reducing border delays, and promoting the use of electronic customs procedures.

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• Trade in Services: The CPTPP covers trade in services, including financial services, telecommunications, and professional services. The agreement aims to reduce barriers to trade in services, such as licensing requirements and restrictions on foreign investment.

• Investment: The CPTPP includes provisions to protect foreign investment in member countries. These provisions include guarantees of fair and equitable treatment, protection against expropriation, and access to dispute resolution mechanisms.

• Intellectual Property Rights: The CPTPP strengthens intellectual property rights protection in member countries. This includes provisions to protect patents, trademarks, copyrights, and trade secrets.

• Government Procurement: The CPTPP opens up government procurement markets to suppliers from member countries. This means that companies from CPTPP countries will have the opportunity to bid on government contracts in other CPTPP countries.

• Labor Standards: The CPTPP includes provisions to protect labor rights in member countries. These provisions require member countries to enforce their own labor laws and to respect internationally recognized labor standards, such as freedom of association and the right to collective bargaining.

• Environmental Protection: The CPTPP includes provisions to protect the environment. These provisions require member countries to enforce their own environmental laws and to promote sustainable development.

• Dispute Resolution: The CPTPP establishes a dispute resolution mechanism to resolve trade disputes among member countries. This mechanism provides for consultation, mediation, and arbitration.

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The CPTPP aims to promote economic growth, create jobs, and raise living standards in member countries. The agreement is expected to boost trade and investment, increase competition, and promote innovation. It is also expected to strengthen political ties among member countries and to promote regional stability.

The Significance of CPTPP for India

India is not a member of the CPTPP, and its relationship with the trade bloc is complex and multifaceted. While India has engaged in discussions with CPTPP members, it has not yet joined the agreement, primarily due to concerns about its potential impact on domestic industries, particularly agriculture and manufacturing.

India's Concerns and Considerations:

Several factors contribute to India's cautious approach towards the CPTPP:

• Impact on Domestic Industries: India's primary concern revolves around the potential impact of tariff reductions on its domestic industries. Sectors like agriculture, textiles, and manufacturing, which are crucial for employment and economic growth, could face increased competition from imports from other CPTPP member countries. India fears that its industries may not be able to compete effectively with the more developed economies within the CPTPP, leading to job losses and economic disruption.

• Dairy Sector Sensitivity: The dairy sector is particularly sensitive for India, as it provides livelihoods for millions of farmers, many of whom are smallholders. India is wary of opening its dairy market to competition from countries like New Zealand and Australia, which have highly efficient and export-oriented dairy industries. Concerns exist that increased dairy imports could depress domestic prices and harm the livelihoods of Indian dairy farmers.

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• Rules of Origin Challenges: The CPTPP's rules of origin requirements pose another challenge for India. These rules determine the extent of domestic content required for a product to qualify for preferential tariff treatment under the agreement. India worries that its industries may struggle to meet these requirements, limiting their ability to benefit from the CPTPP's tariff reductions.

• Intellectual Property Rights Concerns: The CPTPP's provisions on intellectual property rights (IPR) are stricter than India's current IPR regime. India is concerned that these stricter provisions could increase the cost of medicines and hinder its ability to produce generic drugs, which are crucial for providing affordable healthcare to its population.

• Investment Provisions: The CPTPP's investment provisions, which grant foreign investors greater rights and protections, also raise concerns in India. Some fear that these provisions could limit the government's ability to regulate foreign investment in the public interest.

India's Strategic Considerations:

Despite these concerns, India also recognizes the potential benefits of joining the CPTPP. The agreement offers access to a large and growing market, which could boost India's exports and attract foreign investment. Moreover, joining the CPTPP could enhance India's strategic position in the Asia-Pacific region and strengthen its relationships with other member countries.

• Market Access Opportunities: The CPTPP offers significant market access opportunities for Indian exporters. The agreement covers a wide range of sectors, including manufactured goods, services, and agricultural products. By joining the CPTPP, India could gain preferential access to these markets, boosting its exports and creating new jobs.

• Attracting Foreign Investment: The CPTPP's investment provisions could attract more foreign investment to India. The agreement provides greater certainty and protection for foreign investors, making India a more attractive destination for foreign capital.

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• Regional Integration: Joining the CPTPP could deepen India's integration into the Asia-Pacific region. The agreement promotes trade and investment among member countries, fostering closer economic ties and strengthening regional cooperation.

• Strategic Importance: The CPTPP has significant strategic implications for India. The agreement is seen as a counterweight to China's growing economic influence in the region. By joining the CPTPP, India could strengthen its strategic position and contribute to a more balanced regional order.

India's Options and Future Course:

India faces a strategic dilemma regarding the CPTPP. On the one hand, it must address its concerns about the potential impact of the agreement on its domestic industries. On the other hand, it cannot afford to be left behind as other countries in the region forge closer economic ties.

Several options are available to India:

• Joining the CPTPP: India could decide to join the CPTPP after addressing its concerns about the agreement. This would require India to negotiate specific concessions and safeguards to protect its domestic industries.

• Bilateral Trade Agreements: India could pursue bilateral trade agreements with individual CPTPP member countries. This would allow India to tailor its trade relationships to its specific needs and priorities.

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• Regional Comprehensive Economic Partnership (RCEP): India could focus on strengthening the Regional Comprehensive Economic Partnership (RCEP), a trade agreement involving the ten ASEAN countries plus China, Japan, South Korea, Australia, and New Zealand. However, India withdrew from RCEP negotiations in 2019, citing concerns about its impact on domestic industries.

• Wait-and-See Approach: India could adopt a wait-and-see approach, monitoring the impact of the CPTPP on other countries and assessing its potential benefits and costs before making a decision.

Ultimately, India's decision on whether to join the CPTPP will depend on a careful assessment of its economic and strategic interests. India must weigh the potential benefits of increased market access and foreign investment against the risks of increased competition and economic disruption. It must also consider the strategic implications of joining or not joining the agreement.

The Broader Implications of CPTPP

The CPTPP extends far beyond mere tariff reductions and encompasses a wide spectrum of implications that touch upon political, diplomatic, legal, and economic spheres. Its ripple effects are projected to reshape the dynamics of the Asia-Pacific region and influence global trade patterns.

Political Implications:

The CPTPP serves as a catalyst for strengthening political bonds among member nations. By fostering closer economic cooperation, it creates a shared interest in regional stability and security. This shared interest can translate into enhanced diplomatic engagement and collaboration on various political issues, solidifying a sense of community among the CPTPP member states.

Diplomatic Implications:

The agreement serves as a platform for enhanced diplomatic interaction among member countries. It establishes a framework for regular consultations and negotiations on trade-related issues, fostering a culture of dialogue and cooperation. The CPTPP also provides a mechanism for resolving trade disputes, reducing the likelihood of escalation and promoting peaceful resolution of conflicts.

Legal Implications:

The CPTPP establishes a comprehensive set of legal rules and procedures governing trade among member countries. These rules cover a wide range of issues, including tariffs, customs procedures, intellectual property rights, and investment. The agreement provides a legal framework for resolving trade disputes and ensuring that member countries comply with their obligations.

Economic Implications:

The CPTPP is expected to generate substantial economic benefits for member countries. By reducing tariffs and other trade barriers, the agreement will boost trade and investment, increase competition, and promote innovation. This will lead to higher economic growth, job creation, and improved living standards. Studies have estimated that the CPTPP could increase the combined GDP of member countries by billions of dollars annually.

CPTPP and the Shifting Global Trade Landscape

The CPTPP's emergence occurs during a period of significant transformation in the global trade landscape. The rise of protectionism, trade disputes between major economies, and the increasing importance of regional trade agreements are all reshaping the way countries trade with each other.

The CPTPP represents a counter-trend to the rise of protectionism. While some countries are erecting trade barriers, the CPTPP is committed to reducing them. This sends a strong signal that free trade remains a viable path to economic growth and prosperity.

The CPTPP also has implications for the ongoing trade disputes between the United States and China. The agreement could provide an alternative trading framework for countries that are seeking to reduce their dependence on either the United States or China.

Finally, the CPTPP highlights the growing importance of regional trade agreements. As global trade negotiations become more difficult, countries are increasingly turning to regional agreements to promote trade and investment. The CPTPP is one of the most ambitious regional trade agreements ever negotiated, and it could serve as a model for other such agreements in the future.

Historical Context: The Evolution of Trade Agreements

The CPTPP's emergence is best understood within the broader historical context of evolving trade agreements. Over the past several decades, the world has witnessed a proliferation of bilateral and regional trade agreements, reflecting a growing recognition of the benefits of free trade and economic integration.

The General Agreement on Tariffs and Trade (GATT), established in 1948, laid the foundation for the multilateral trading system. The GATT aimed to reduce tariffs and other trade barriers on a global scale. It was succeeded by the World Trade Organization (WTO) in 1995, which has a broader mandate and stronger enforcement mechanisms.

In addition to the WTO, numerous regional trade agreements have emerged, such as the North American Free Trade Agreement (NAFTA), the European Union (EU), and the Association of Southeast Asian Nations (ASEAN). These agreements aim to promote trade and investment among member countries by reducing tariffs and other trade barriers.

The CPTPP represents the latest evolution in this trend. It is a comprehensive trade agreement that covers a wide range of issues, including tariffs, customs procedures, intellectual property rights, and investment. It is also a high-standard agreement, meaning that it sets ambitious goals for trade liberalization and economic integration.

Stakeholder Perspectives: Diverse Interests and Positions

The CPTPP involves a diverse range of stakeholders, each with their own interests and perspectives. These stakeholders include:

• CPTPP Member Countries: The CPTPP member countries are the primary stakeholders in the agreement. They are committed to promoting free trade and economic integration in the Asia-Pacific region. They believe that the CPTPP will boost their economies, create jobs, and improve living standards.

• Businesses: Businesses are also major stakeholders in the CPTPP. They stand to benefit from the agreement through increased trade and investment opportunities. The CPTPP will lower the cost of goods and services, making them more competitive in international markets.

• Consumers: Consumers are another important stakeholder group. They will benefit from the CPTPP through lower prices and a wider variety of goods and services.

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• Workers: The CPTPP could have both positive and negative impacts on workers. On the one hand, the agreement could create new jobs in export-oriented industries. On the other hand, it could lead to job losses in industries that face increased competition from imports.

• Civil Society Organizations: Civil society organizations have diverse views on the CPTPP. Some support the agreement, arguing that it will promote economic development and improve living standards. Others oppose the agreement, raising concerns about its potential impacts on labor rights, environmental protection, and public health.

Future Outlook: Expansion and Influence

The CPTPP is expected to expand in the coming years as more countries join the agreement. Several countries have expressed interest in joining the CPTPP, including the United Kingdom, Thailand, South Korea, and Indonesia.

The expansion of the CPTPP would further increase its economic and strategic significance. It would create an even larger free trade zone, encompassing a greater share of the global economy. It would also strengthen the CPTPP's position as a counterweight to China's growing economic influence in the region.

The CPTPP could also serve as a model for other regional trade agreements. Its comprehensive scope and high standards could inspire other countries to pursue similar agreements. This could lead to a further fragmentation of the global trading system, with multiple regional trade agreements coexisting alongside the WTO.

India's Continued Engagement: A Path Forward

Despite its current non-member status, India's engagement with the CPTPP remains a crucial aspect of its foreign policy and economic strategy. The evolving global trade landscape necessitates a proactive approach from India, carefully balancing its domestic interests with the opportunities presented by regional trade agreements.

India's future engagement with the CPTPP could take several forms:

• Continued Dialogue: India should continue its dialogue with CPTPP members, seeking to address its concerns and explore potential areas of cooperation. This dialogue could focus on specific issues, such as tariff reductions, rules of origin, and intellectual property rights.

• Sector-Specific Agreements: India could consider negotiating sector-specific agreements with CPTPP members. This would allow India to selectively liberalize trade in specific sectors, while protecting its sensitive industries.

• Observer Status: India could seek observer status in the CPTPP. This would allow India to participate in CPTPP meetings and gain a better understanding of the agreement's workings.

• Eventual Membership: Ultimately, India could decide to join the CPTPP after addressing its concerns and negotiating specific concessions. This would require a strong political commitment and a willingness to make difficult compromises.

Whatever path India chooses, its engagement with the CPTPP will be crucial for shaping its economic future and its role in the Asia-Pacific region. The CPTPP represents a significant development in the global trade landscape, and India cannot afford to ignore it. A proactive and strategic approach is essential to ensure that India benefits from the opportunities presented by the CPTPP, while protecting its domestic interests and promoting its economic growth.